Could my home insurance company cancel my policy after I file just one claim?

Generally your home insurance company would not cancel your insurance just because you filed a single claim. But filing a few claims over a period of three to five years could raise a red flag as far as the insurer is concerned and lead to non-renewal or a premium hike, depending on the insurance company and the state where you live.

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That's why consumer advocates advise homeowners to rely on their insurance for major issues and to avoid filing small claims. You'll actually be financially ahead in many cases by paying out of pocket for small problems versus collecting a few hundred dollars from the insurance company, only to be hit by a premium increase at renewal time.

Some states restrict insurance companies from dropping customers because they filed too many claims. In Pennsylvania, for instance, home insurance companies can't cancel a policy because of the property damage claim history, but they still can hike the premium. Other states say insurance companies can raise home insurance premiums due to the claim history only after a certain number or size of claims has been filed. Still other states restrict home insurance companies from penalizing customers for simply reporting a claim. Check your state's insurance department website for details on the laws in your state, and talk to your home insurance agent to learn more.

Beware, too, that your claim history will dog you when you get home insurance quotes from other companies. Car and home insurance companies submit information about claims into a national database known as CLUE, which is operated by ChoicePoint and stands for the Comprehensive Loss Underwriting Exchange. The claim record, and in some cases even your inquiries about potential claims, stay in the database for seven years. Insurance companies check the database and can learn about claims you filed with other insurers. The more claims you filed, the riskier you look and the more you pay for insurance.

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